A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

October 28, 2006

The biggest ponzi scheme of all - borrow from China to buy China's crap

"And China will be left holding a trillion dollars worth of useless paper. China and the US will reap what they have sown."

Or the central bank of China (along with Japan, Korea, and Taiwan) could simply continue to loan us money. An electronic printing press never runs out of ink. Why do you predict an apocalyptic ending when it's not in the best interest for any of the parties involved in this game?

Come on tell us, what would trigger the end? And why would it be good?

"And China will be left holding a trillion dollars worth of useless paper."

Ha! That's what YOU think. China is quietly diversifying OUT of dollars, and Yes, China IS buying GOLD, so those numbers posted are probably as phoney as a hooker in a share holders meetng. He who has the gold WILL make the rules.

What is left unsaid, when, not if, Chiina decides to take us on militarily over NK, Japan, Taiwan, Iran or whatever it comes down to. The first weapon fired will be economic, we can't field an army if we can pay for it.

Even without a war, could the mere threat of an economic showdown be enough for China to take what it wants from us?? I think so.

"china will continue to lend but can americans continue to borrow when they are barely able to meet minimum interest only payments on the debt."

That's where the magic of inflation comes in. If you told someone in 1956 that in 2006 the average american home would cost $303K, they would have laughed. But here we are 50 years later and people don't think twice about signing on the dotted line.

"universities, today, are apparently getting kickbacks from "student loan" providers and see it as a source of extra income.

ultimately, someone will have to pay the bill."

Did it ever occur to you that student loans themselves are nothing but government-backed subsidies for universities? Food stamps are government subsidies for the grocery industry. If the #@*! federal government would stop this handout nonsense, maybe prices at universities and grocery stores would decline.

What a bunch of ridiculous scare mongering, I like how this story had absolutely no hard facts in it other than the $1 Trillion is owned by Chinese.

If the Chinese stopped investing why would interest rates "skyrocket" as is claimed? US Government securities are sold at auction, so let's say the Chinese stopped bidding on these auctions. 30 year treasuries are at 4.8% now, so does any reasonable person believe that there aren't investors out there (Japan, Europe, Korea, Signapore, Taiwan, even US investors) willing to buy these for 5.0% still? How about 5.5%? How about 6.0%? Yes, interest rates would go up, but by no stretch of the imagination would they "skyrocket" as is claimed.

"so does any reasonable person believe that there aren't investors out there (Japan, Europe, Korea, Signapore, Taiwan, even US investors) willing to buy these for 5.0% still? How about 5.5%? How about 6.0%? Yes, interest rates would go up, but by no stretch of the imagination would they "skyrocket" as is claimed."

A reasonable/rational person expects a positive ROI for bonds purchased. Earning 5% when inflation is 12% is not rational behavior.

Just because those central bankers are acting irrationally, doesn't mean the general public will foolishly buy bonds offered at negative real interest rates. In a free market, interest rates will "shoot up" to some premium over the perceived inflation rate.